Sebi mulls proposals on PIDs' appointment process at key institutions

Sebi on Thursday came out with proposals connected with the process adopted by the markets regulator for the appointment of public interest directors (PIDs) on stock exchanges, clearing corporations and depositories, in a move aimed at improving shareholders' participation in the process.

For improving ease of doing business for PIDs, the proposals include easing documentation requirements when being considered for PID appointment, allowing payment of fixed stipend to them in addition to sitting fees, and reducing cooling off period for their appointment.

"The role of PIDs is vital in enhancing corporate integrity and governance standards in any market infrastructure institutions (MIIs). PIDs, especially, play a vital role in balancing the interests of MII's management, its shareholders and more importantly ensuring the safety, efficiency and integrity for the market participants using the infrastructure of these MIIs.

"PIDs ensure that in pursuance of their business objectives, MIIs do not lose sight of responsibilities vested upon them as public utility infrastructure institutions," Sebi said in its consultation paper.

PID as an independent director representing the interests of investors in the securities market.

The regulator has suggested that there is no need to change the process of appointing or reappointing PIDs to the governing board of an MII and present process of Sebi approval may continue.

An alternate process for appointment of PIDs has been suggested whereby after receiving names from MIIs, Securities and Exchange Board of India (Sebi) would examine the application and would gives NOC to MIIs to take it to their shareholders for approval.

After receiving NOC from Sebi, shareholders' approval will be taken by the MII. Once shareholders approve a candidate, the application will comeback to Sebi for final approval.

"If suitable candidates are not found acceptable to shareholders after two rounds of the above exercise by MIIs, Sebi shall appoint the PID, it added.

Under the current regulatory regime, shareholders do not have material oversight powers with respect to the functioning of the board of MIIs. In case of decisions of the governing board impacting shareholder wealth, shareholders, in hindsight, may feel aggrieved about not being included in the PID appointment process.

On remuneration, Sebi proposed that each PID of MIIs in addition to sitting fees and expenses relating to attending meeting of the board and its committees should be paid fixed remuneration of up to Rs 30 lakh per annum.

Also, it has been proposed that the cooling off period of one year should be applicable if a PID is proposing to join a competitor MII or associate with competitor MII only.

The regulator has sought public comments on whether Sebi should continue with the existing process for documentation at the time of shortlisting of PIDs or adopt a two-stage process for shortlisting at the time of appointment.

Sebi has sought comments on the proposal till September 12.